Year: 2018

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week we had Connie Loizos in the studio along with Kate Clark, myself and a special guest. The special guest was fitting, as it was a special episode. Why? Because this is our 100th episode, a milestone that would have probably seemed a silly idea back when we started the show.

This week our first guest, SaaStr founder and venture capitalist Jason Lemkin came back on the show. When he first showed up, we talked Elon Musk. This time it was ridesharing liquidity, ridesharing M&A and more.

Sadly two of our founding members (Katie Roof and Matthew Lynley) are elsewhere as we reach 100 shows, but a big cheers to them for their work. Hugs and thanks to Chris Gates for producing Equity with a rare mixture of kindness and patience. Material appreciation to TechCrunch’s Henry Pickavet and Yashad Kulkarni for approving and shepherding the project thus far, and a big round of appreciation for Connie Loizos, Danny Crichton and Kate Clark for joining the hosting crew.

Finally, thanks to you for sticking with us. Millions of downloads, live shows successful and not and three-figures of episodes later, we’re still here!

Alright, enough self-congratulation. Let’s talk tech. And money.

This week we had a bit of a laundry list of topics to get through. The first of which was Lyft’s now publicly known, but privately filed IPO document. The company is going public about going public while staying private about the same matter.

Regardless, Lyft’s decision to go public now should mean it’s the first out of the gate. Uber will go public second. Which company that order will assist isn’t super clear. In the past, it was thought that the first of Uber and Lyft to go public would expose itself to pricing pressure from its yet-private competitor. But this deep into the ridesharing saga, and with both companies still so unprofitable, perhaps that isn’t the case.

Uber may be scooter shopping regardless, so perhaps its IPO isn’t in the offing. Yes, reporting indicates that the company may be playing Duck Hunt because it could be taking aim at Bird. With an M&A gun? This analogy isn’t good.

If Uber buys Bird, say, does that mean Lyft buys Lime? Even though Uber is a Lime investor? Place your bets.

Next up we riffed on Utah’s tech scene, the well-known Silicon Slopes . The region’s 2018 has been big. Podium raised and posted big revenue growth figures. Pluralsight and Domo went public. And most recently, Weave raised $37.5 million. It’s a big year for the state. My view is that it is no longer up-and-coming. Our guest agreed.

And finally, Kate took us through the Huawei fiasco. The company’s CFO has been detained in Canada for what MSNBC calls “U.S. extradition.” Oof. This at a time when the American premier is rattling about in his barrel about trade. The stock market is worried. Maybe we should be as well.

Nigerian trucking logistics startup Kobo360 has raised $6 million to upgrade its platform and expand operations to Ghana, Togo, and Cote D’Ivoire.

The company — with an Uber -like app that connects truckers and companies with freight needs — gained the equity financing in an IFC led investment. The funding saw participation from others, including TLcom Capital and Y Combinator.

With the investment Kobo360 aims to become more than a trucking transit app.

“We started off as an app, but our goal is to build a global logistics operating system. We’re no longer an app, we’re a platform,” founder Obi Ozor told TechCrunch.

In addition to connecting truckers, producers and distributors, the company is building that platform to offer supply chain management tools for enterprise customers.

“Large enterprises are asking us for very specific features related to movement, tracking, and sales of their goods. We either integrate other services, like SAP, into Kobo or we build those solutions into our platform directly,” said Ozor.

Kobo360 will start by developing its API and opening it up to large enterprise customers.

“We want clients to be able to use our Kobo dashboard for everything; moving goods, tracking, sales, and accounting…and tackling their challenges,” said Ozor.

Kobo360 will also build more physical presence throughout Nigeria to service its business. “We’ll open 100 hubs before the end of 2019…to be able to help operations collect proof of delivery, to monitor trucks on the roads, and have closer access to truck owners for vehicle inspection and training,” said Ozor.

Kobo360 will add more warehousing capabilities, “to support our reverse logistics business”—one of the ways the company brings prices down by matching trucks with return freight after they drop their loads, rather than returning empty, according to Ozor.

Kobo360 will also use its $6 million investment to expand programs and services for its drivers, something Ozor sees as a strategic priority.

“The day you neglect your drivers you are not going to have a company, only issues. If Uber were more driver focused it would be a trillion dollar company today,” he said.

The startup offers drivers training and group programs on insurance, discounted petrol, and vehicle financing (KoboWin). Drivers on the Kobo360 app earn on average approximately $5000 per month, according to Ozor.

Under KoboCare, Kobo360 has also created an HMO for drivers and an incentive based program to pay for education. “We give school fee support, a 5000 Naira bonus per trip for drivers toward educational expenses for their kids,” said Ozor.

Kobo360 will complete limited expansion into new markets Ghana, Togo, and Cote D’Ivoire in 2019. “The expansion will be with existing customers, one in the port operations business, one in FMCG, and another in agriculture,” said Ozor

Ozor thinks the startup’s asset-free, digital platform and business model can outpace traditional long-haul 3PL providers in Nigeria by handling more volume at cheaper prices.

“Owning trucks is just too difficult to manage. The best scalable model is to aggregate trucks,” he told TechCrunch in a previous interview.

With the latest investment, IFC’s regional head for Africa Wale Ayeni and TLcom senior partner Omobola Johnson will join Kobo360’s board. “There’s a lot of inefficiencies in long-haul freight in Africa…and they’re building a platform that can help a lot of these issues,” said Ayeni of Kobo360’s appeal as an investment.

The company has served 900 businesses, aggregated a fleet of 8000 drivers and moved 155 million kilograms, per company stats. Top clients include Honeywell, Olam, Unilever, Dangote, and DHL.

MarketLine estimated the value of Nigeria’s transportation sector in 2016 at $6 billion, with 99.4 percent comprising road freight.

Logistics has become an active space in Africa’s tech sector with startup entrepreneurs connecting digital to delivery models. In Nigeria, Jumia founder Tunde Kehinde departed and founded Africa Courier Express. Startup Max.ng is wrapping an app around motorcycles as an e-delivery platform. Nairobi-based Lori Systems has moved into digital coordination of trucking in East Africa. And U.S.-based Zipline—who launched drone delivery of commercial medical supplies in partnership with the government of Rwanda and support of UPS—and is in “process of expanding to several other countries,” according to a spokesperson.

Kobo360 has plans for broader Africa expansion but would not name additional countries yet.

Ozor said the company is profitable, though the startup does not release financial results. Wale Ayeni also wouldn’t divulge revenue figures, but confirmed IFC’s did full “legal and financial due diligence on Kobo’s stats,” as part of the investment.

Ozor named Lori Systems as Kobo360’s closest African startup competitor.

On the biggest challenge to revenue generation, it’s all about service delivery and execution, according to Ozor.

“We already have volume and demand in the market. The biggest threat to revenues is if Kobo360’s platform doesn’t succeed in solving our client’s problems and bringing reliability to their needs,” he said.

Southeast Asian ride-hailing firm Grab has made its most ambitious investment to date after it backed India-headquartered budget hotel network OYO to the tune of $100 million. The investment was part of a $1 billion Series E round led by SoftBank’s Vision Fund that closed back in September.

The deal was first made public via a regulatory filing in India, as Economic Times reported.

“We can confirm the investment into OYO,” a Grab spokesperson told TechCrunch.

Grab has done a handful of strategic deals thus far, including investments in bike-sharing startup oBike and grocery delivery service HappyFresh, but those have been far smaller and local to Southeast Asia. Its highest acquisition to date is around $100 million for Indonesia-based offline payment network Kudo some 18 months ago.

The deal with OYO is not only far higher but also outside of its immediate home turf, which spans eight countries in Southeast Asia. OYO’s business is heavily focused on India and China, but the company is also active in Nepal, Malaysia and, most recently, the UK. That Series E deal was aimed at funding international growth and it looks like Grab will work closely with the company to help expand its presence in Southeast Asia, a region with over 650 million consumers and a fast growing digital economy.

A source with knowledge of discussions told TechCrunch that Grab was primarily motivated to partner with OYO for its potential to boost its GrabPay service. The core idea here is that GrabPay could become the preferred payment method for OYO in Southeast Asia, thereby boosting Grab’s ambition of dominating the region’s mobile payment space.

OYO claims to have over 10,000 franchised or leased hotels in its network which it says spans 350 cities across five countries, although most of that is concentrated on India and China. In the latter country, OYO says it offers 87,000 rooms in 171 cities after launching in the country in June 2018.

Southeast Asia, where OYO is already present via Malaysia, is an obvious next step and Grab could also give it a helpful boost to reaching customers by including its service on its in-app platform. Months after a deal to buy Uber’s local business in exchange for a 27.5 percent equity stake, Grab unveiled a ‘platform’ designed to aggregate services in the region to give its audience of over 110 million registered users visibility of services that they may like. That, in turn, can help companies tap into the Grab userbase, although some users have complained that Grab’s app is increasingly ‘cluttered’ with additional services and information beyond basic transportation.

Grab has already partnered with travel giant Booking — which recently invested $200 million in its business — to offer deals to its users, and it is quite conceivable that it could do the same with OYO to help the Indian firm’s efforts in Southeast Asia.

The $11 billion-valued ride-hailing firm isn’t short of cash — having raised over $3 billion this year — so it can afford to make the occasional splashy investment. However, it might need a budget reallocation. That’s because Indonesian rival Go-Jek’s continued Southeast Asia expansion is threatening to reignite a subsidiary war that Grab probably thought it had won for good after Uber’s exit. It’ll be interesting to watch how that competition weighs in Grab’s overall effort to go from ride-hailing into the ‘super app’ space, covering payments, local services and more.

ByteDance, the Chinese company behind the immensely popular video app TikTok, is in talks to raise $1.45 billion for a new fund, The Information reported on Friday citing sources.

The fresh vehicle will help power artificial intelligence and media content for the $75 billion startup, which reportedly leapfrogged Uber’s valuation after raising $3 billion in October.

ByteDance declined to comment on the matter.

The Chinese startup has set off an aggressive global expansion that sees it merge teen video app Musical.ly into TikTok, which has 100 million and 500 million users, respectively. The upstart has compelled Tencent to up the ante in short videos and Facebook to make a clone.

By 2021, ByteDance aims to count at least 50 percent of its total users from overseas, its founder and chief executive officer Zhang Yiming said during a speech in June.

In China, a fold of ByteDance’s media products — ranging from short-video platforms, a news portal to a humor app — have been in hot water with media watchdogs who are tightening control over online content. The harshest punishment arrived when the government shuttered Neihan Duanzi, literally meaning “implied jokes” in Chinese, for charges of propagating “vulgar content”.

The Beijing-based media company is seeking capital from government-led funds and state-owned investment banks for its new venture fund, according to The Information.

The gesture could help six-year-old ByteDance navigate relationships with local authorities. Meanwhile, it has already hired thousands of censors to ensure its content does not deviate from China’s official guidelines, though the startup has long prided itself on its AI prowess to make personalized recommendations to users.

Following speculation that SoftBank is hiring a China-based team, so the Japanese investment giant has brought on a first venture partner (and first female) for its $100 billion Vision Fund.

Kirthiga Reddy, a former executive with Facebook, has taken the role and, in doing so, she becomes the first female member of SoftBank’s Vision Fund investment team. She will be based in San Carlos, Silicon Valley.

Reddy spent eight years at Facebook, mostly as managing director for its business in India and Southeast Asia before a two-year stint in the U.S. leading global partnerships.

In her new role, she will work closely with Deep Nishar, senior managing partner at SoftBank Investment Advisors who is located in the Bay Area and was previously an exec at Google and LinkedIn . Reddy said her focus will be frontier technologies such as AI, robotics, health, bio engineering, IoT and more. In a comment to Bloomberg, she revealed that she is “actively recruiting” for the firm, especially for female investors.

“I look forward to contributing to their mission to positively shape the future by seeking to back the boldest, most transformative optimistic, and ideas of today. Like in other investment firms, the Venture Partner role enables quick integration of new talent from non-investing backgrounds, which is a perfect fit for me. I look forward to bringing my technical and business expertise – from both enterprise and consumer technology, in developed and emerging markets – to the Vision Fund team,” Reddy wrote in a post on LinkedIn announcing the move.

The Vision Fund has been criticized for an all-male cast of 10 deal-makers. SoftBank founder Masayoshi Son said in September that he has “no prejudice of any kind,” and first-in-command Rajeev Misra has led an effort to hire women for the team.

It’s a busy week for Epic Games . Fresh from pushing out a major season 7 update for Fortnite, so the gaming giant has taken the wraps off its own games store.

First announced earlier this week, the Epic Games Store is targeted squarely at Steam — the giant in the digital game commerce space — and it quietly went live today.

Right now there’s a small cluster of games available including Hades, a new title from Supergiant Games that is in ‘early access’ for $19.99, and Epic’s own Fortnite and Unreal Tournament, both of which are free. But Epic is saying that’s there’s a lot more to come. In particular, the store will offer a free game every two weeks, starting out with Subnautica from December 14-17 and Super Meat Boy from December 28 until January 10.

What is most interesting about the store is the revenue split, which is just twelve percent. That has set off a change at Valve, the firm behind Steam, as we reported earlier this week:

While Valve will continue to take an App Store-like 30 percent from sales of game makers with less than 10 million in revenue, that figure drops to 25 percent until they hit 50 million revenue, from which point the slice drops to 20 percent.

All in all, the store is very early-stage but you can imagine that Epic is working to add more flesh to the bones. It makes absolute sense that the company is aiming to capitalize on the phenomenal success of Fortnite — which was estimated to be grossing as much as $2 million per day in the summer — by building a destination for gamers. Indeed, a big clue came from its decision to bypass the Google Play Store and offer its Android app directly from its website — that’s a move that is estimated to cost Google around $50 million in lost earnings in 2018.

“As a developer ourselves, we have always wanted a platform with great economics that connects us directly with our players,” Epic Games CEO Tim Sweeney told TechCrunch in an emailed statement sent earlier this week. “Thanks to the success of Fortnite, we now have this and are ready to share it with other developers.”

The Epic Games Store is part of a wider vision for the coming that prompted a range of investors to pump $1.25 billion into the company in October. That round was participation from the likes of KKR, Kleiner Perkins and Lightspeed Venture Partners and it is said to value the Epic Games business — which also includes Unreal Engine for game development — at more than $15 billion.

Epic is the only gaming firm to go after Valve this year. Discord introduced a game store in August — just months earlier, Valve appeared to go after Discord with the rollout of its own gamer chat system.

So everyone is going after everyone, but Epic’s big advantage continues to be Fortnite.

Fortnite, the world’s most popular game, is getting into the festive period after it released its much-anticipated Season 7 update which includes lots of Christmasy touches.

The new season sees an iceberg smash into the island where the battle royale smash hit is located, that means there’s frozen terrain in the form of places like Frosty Flights and Polar Peak as well as falling snow, snow-covered trees and slippery ice.

The most notable update to the playing style is the arrival of X-4 Stormwing planes which you can take for a ride in the skies. Beyond helping you get around quicker, they’re also complete with weapons for shooting down other planes or taking aim at enemies on the ground. The game now also includes ziplines, another useful addition that’ll change how players get around the map.

The festive touches also include wrapping for weapons and vehicles, while there’s a Sergeant Santa skin that’s up for grabs.

Outside the regular battle mode, Epic Games has added a Minecraft-like ‘creative’ mode that gives each player their own island which can be customized. This, to me, is one of the best introductions to date since the new game mode gives players a new way to battle privately with friends.

Creative is initially limited to players who buy the season 7 battle pass, but it’ll be available to all Fortnite gamers after December 13.

The next few years will see voice automation take over many aspects of our lives. Although voice won’t change everything, it will be part of a movement that heralds a new way to think about our relationship with devices, screens, our data and interactions.

We will become more task-specific and less program-oriented. We will think less about items and more about the collective experience of the device ecosystem they are part of. We will enjoy the experiences they make possible, not the specifications they celebrate.

In the new world I hope we relinquish our role from the slaves we are today to be being back in control.

Voice won’t kill anything

The standard way that technology arrives is to augment more than replace. TV didn’t kill the radio. VHS and then streamed movies didn’t kill the cinema. The microwave didn’t destroy the cooker.

Voice more than anything else is a way for people to get outputs from and give inputs into machines; it is a type of user interface. With UI design we’ve had the era of punch cards in the 1940s, keyboards from the 1960s, the computer mouse from the 1970s and the touchscreen from the 2000s.

All four of these mechanisms are around today and, with the exception of the punch card, we freely move between all input types based on context. Touchscreens are terrible in cars and on gym equipment, but they are great at making tactile applications. Computer mice are great to point and click. Each input does very different things brilliantly and badly. We have learned to know what is the best use for each.

Voice will not kill brands, it won’t hurt keyboard sales or touchscreen devices — it will become an additional way to do stuff; it is incremental, not cannibalistic.

We need to design around it

Nobody wanted the computer mouse before it was invented. In fact, many were perplexed by it because it made no sense in the previous era, where we used command lines, not visual icons, to navigate. Working with Nokia on touchscreens before the iPhone, the user experience sucked because the operating system wasn’t designed for touch. 3D Touch still remains pathetic because few software designers got excited by it and built for it.

What is exciting about voice is not using ways to add voice interaction to current systems, but considering new applications/interactions/use cases we’ve never seen.

At the moment, the burden is on us to fit around the limitations of voice, rather than have voice work around our needs.

A great new facade

Have you ever noticed that most company desktop websites are their worst digital interface; their mobile site is likely better and the mobile app will be best. Most airline or hotel or bank apps don’t offer pared-down experiences (like was once the case), but their very fastest, slickest experience with the greatest functionality. What tends to happen is that new things get new cap ex, the best people and the most ability to bring change.

However, most digital interfaces are still designed around the silos, workflows and structures of the company that made them. Banks may offer eight different ways to send money to someone or something based around their departments; hotel chains may ask you to navigate by their brand of hotel, not by location.

The reality is that people are task-oriented, not process-oriented. They want an outcome and don’t care how. Do I give a crap if it’s Amazon Grocery or Amazon Fresh or Amazon Marketplace? Not one bit. Voice allows companies to build a new interface on top of the legacy crap they’ve inherited. I get to “send money to Jane today,” not press 10 buttons around their org chart.

It requires rethinking

The first time I showed my parents a mouse and told them to double-click on it I thought they were having a fit on it. The cursor would move in jerks and often get lost. The same dismay and disdain I once had for them, I now feel every time I try to use voice. I have to reprogram my brain to think about information in a new way and to reconsider how my brain works. While this will happen, it will take time.

What gets interesting is what happens to the 8-year-olds who grow up thinking of voice first, what happens when developing nations embrace tablets with voice not desktop PCs to educate. When people grow up with something, their native understanding of what it means and what it makes possible changes. It’s going to be fascinating to see what becomes of this canvas.

Voice as a connective layer

We keep being dumb and thinking of voice as being the way to interact with “a” machine and not as a glue between all machines. Voice is an inherently crap way to get outputs; if a picture states a thousand words, how long will it take to buy a t-shirt. The real value of voice is as a user interface across all devices. Advertising in magazines should offer voice commands to find out more. You should be able to yell at the Netflix carousel, or at TV ads to add products to your shopping list. Voice won’t be how we “do” entire things, it will be how we trigger or finish things.

Proactivity

We’ve only ever assumed we talked to devices first. Do I really want to remember the command for turning on lights in the home and utter six words to make it happen? Do I want to always be asking. Assuming devices are select in when they speak first, it’s fun to see what happens when voice is proactive. Imagine the possibilities:

• “Welcome home, would you like me to select evening lighting?”
• “You’re running late for a meeting, should I order an Uber to take you there?”
• “Your normal Citi Bike station has no bikes right now.”
• “While it looks sunny now, it’s going to rain later.”

Automation

While many think we don’t want to share personal information, there are ample signs that if we get something in return, we trust the company and there is transparency, it’s OK. Voice will not develop alone, it will progress alongside Google suggesting emails replies, Amazon suggesting things to buy, Siri contextually suggesting apps to use. We will slowly become used to the idea of outsourcing our thinking and decisions somewhat to machines.

We’ve already outsourced a lot; we can’t remember phone numbers, addresses, birthdays — we even rely on images to jar our recollection of experiences, so it’s natural we’ll outsource some decisions.

The medium-term future in my eyes is one where we allow more data to be used to automate the mundane. Many think that voice is asking Alexa to order Duracell batteries, but it’s more likely to be never thinking about batteries or laundry detergent or other low consideration items again nor the subscriptions to be replenished.

There is an expression that a computer should never ask a question for which it can reasonably deduce the answer itself. When a technology is really here we don’t see, notice or think about it. The next few years will see voice automation take over many more aspects of our lives. The future of voice may be some long sentences and some smart commands, but mostly perhaps it’s simply grunts of yes.

Over the summer, Microsoft President Brad Smith called for governments to take a closer look at how facial detection technology is being implemented across the globe. This week, he returned with a similar message — only this time the executive is calling out fellow technologies to help address myriad issues around the technology before it becomes too pervasive.

It’s easy enough to suggest that the ship has sailed. After all, facial recognition is already fairly ubiquitous on everything from Facebook to Apple Animojis. But if the past year has taught us anything, it’s that the governments of the world can’t wait to implement the tech in a broader way — and plenty of tech firms are more than happy to help.

Smith points to a trio of potential pitfalls for the tech: biased outcomes, invasion of privacy and mass surveillance. The ACLU has been raising red flags on that first point for some time, asking Congress to implement a moratorium on surveillance technologies. The group found that Amazon’s Rekognition software wrongly associated headshots of members of Congress with criminal mugshots.

The new letter finds Microsoft frustrated at regulatory foot-dragging, instead placing the burden on tech regulation on the companies themselves. “We believe that the only way to protect against this race to the bottom is to build a floor of responsibility that supports healthy market competition,” writes Smith. “And a solid floor requires that we ensure that this technology, and the organizations that develop and use it, are governed by the rule of law.”

In other words, as Smith puts it, “you can’t put the genie back in the bottle.” So Microsoft is looking to set the tone here, committing to its own code, which it plans to implement by the first quarter of next year.

The piece details a number of safeguards and vetting that companies can implement to help avoid some of the more troubling pitfalls here. Among the recommendations are some fairly straightforward suggestions, like transparency, third-party testing, technology reviews by humans and properly identifying where and when the technology is being implemented. All of the above honestly sound pretty straightforward and doable.

Microsoft is set to follow up these suggestions with a more detailed document arriving next week that will more thoroughly detail its plans, while soliciting suggestions from people and groups about how to more broadly implement them.

It’s been a rocky year for MoviePass, something that CEO Mitch Lowe acknowledged in an interview this week with Variety.

“We have a lot to prove to all our constituents,” Lowe said. “We don’t just have to prove ourselves to our members, we also have to prove ourselves to the investment community, our employees, and our partners. We believe we’re doing everything that we possibly can to deliver a great service and we’re in the process of fixing all the things that went wrong.”

To that end, the company is launching a new pricing structure that will take effect in January. If you like paying $9.95, don’t worry: You’ll still be able to do that (at least in some geographies). If, on the other hand, you’re willing to pay a little more, you’ll no longer be limited by the ever-changing list of movies that MoviePass is supporting on a given day.

So there are now three tiers, each of them offering three movie tickets each month. There’s Select, which will cost between $9.95 and $14.95 per month (depending on geography), and will only allow viewers to watch certain movies on certain days; All Access, which costs between $14.95 and $19.95 and allows you to go to any standard screening; and Red Carpet, which costs between $19.95 and $24.95 and includes one IMAX, 3D or other large-format screening each month.

The company says that this new structure will allow it to break even on the tickets it’s selling — a key step to making the business model work.

MoviePass fans will likely remember that the company appeared to be running out of money over the summer, leading it to announce a price increase, only to back away from the price hike in favor of adding limitations on how many movies and which movies subscribers could see.

Meanwhile, the New York attorney general’s office said it was investigating MoviePass for possible securities fraud, and parent company Helios and Matheson said it would spin off MoviePass into a separate company. (TechCrunch’s parent company has a stake in MoviePass.)

The competition is growing. And app store intelligence company Sensor Tower says MoviePass only added 12,000 new users to its mobile app last month, down 97 percent from the growth it was seeing at its high point in January.

In addition to rethinking its pricing, MoviePass is also making organizational changes. The company told The New York Times that although Lowe will remain CEO, he’ll be handing over responsibility for day-to-day operations to Executive Vice President Khalid Itum.